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Most Foreign Invested Enterprises (FIEs) are governed by a board of directors and senior management. An exception exists for Cooperative Joint Ventures that the parties have chosen not to incorporate (these are governed by a management committee).

Powers: The Chairman, as the legal representative of the enterprise, has the energy to legally bind the enterprise and bears substantial duty for its acts and

omissions. Most of the powers and func...

Board of Directors

Most Foreign Invested Enterprises (FIEs) are governed by a board of directors and senior management. An exception exists for Cooperative Joint Ventures that the parties have selected not to incorporate (these are governed by a management committee).

Powers: The Chairman, as the legal representative of the enterprise, has the energy to legally bind the enterprise and bears substantial responsibility for its acts and

omissions. Most of the powers and functions of the board are set forth in the Articles of Association and in the Joint Venture Contract.

Number of Directors: The board of directors of both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are needed to appoint amongst three and 13 directors. FIEs with couple of shareholders may be capable to convince the examination and approval authority to dispense with the board of directors and use an executive director.

Membership: In an Equity Joint Venture (EJV), board membership need to be proportionate to capital contributions. The board should have a Chairman, but need not have a Vice Chairman. If each are utilised, nonetheless, then if the foreign investor selects the Chairman, the Chinese party should choose the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings must be held as soon as a year, and a quorum is two/three of the directors. For Equity Joint Ventures, unanimous consent of the board is needed for amendment of the Articles of Association, increase or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is significantly a lot more flexible for Wholly Foreign Owned Enterprises - board meetings and quorum needs are governed by the WFOEs Articles of Association.

Director & Officer Liability: Director and officer liability law and enforcement is not as properly-developed as in a lot of Western nations. Correspondingly, the industry for directors and officers liability insurance is not specifically effectively-developed either. The Chairmans role as the enterprises legal representative encumbers him with each civil and criminal liability for the acts and/or omissions of the enterprise. Directors can be held liable for board resolutions that are illegal or that contravene the Articles of Association and lead to losses to the company. Directors, supervisors and senior management personnel can be held liable if they lead to losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures must appoint a General Manager, one particular or more Deputy General Managers, and a Finance Manager. Even though not essential for other FIEs, this is typical practice for these enterprises as nicely. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor might nominate the Deputy Basic Manager, and vice versa.

General Manager: The Common Manager is charged with day-to-day operation and could be a foreign national if the enterprise so chooses. The responsibilities of the Basic Manager should be listed in the Articles of Association even if Chinese law does not need the appointment of a General Manager (as in the case of WFOEs). The Common Manager is charged by law with responsibility for formulating a management method for the enterprise production, operations and management, employment and termination of employees (except these that need to be employed and dismissed by the board of directors) and implementing board resolutions and investment and business plans.

Deputy Basic Managers: A Foreign Invested Enterprise may appoint a single or much more Deputy Basic Managers (EJVs are essential to appoint at least one).

Finance Manager: An Equity Joint Venture is necessary to appoint a single or much more accountants to assist the General Manager with finances. This is also widespread practice for other FIEs.

Supervisors

LLCs are needed to have supervisory boards, even though this is frequently ignored in practice by WFOEs and Joint Ventures. success